Good day, ladies and gentlemen and welcome to the Q2 2019 Golden Entertainment, Inc. Earnings Conference Call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Joe Jaffoni, investor relations. Mr. Jaffoni, you may begin.

Thank you very much, Josh, and good afternoon, everyone. By now, everyone should have access to our second-quarter 2019 earnings release, which can be found on the company's website at www.goldenent.com under the Investors section. Before we begin our formal remarks, we need to remind everyone that today's discussion will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements, which are usually identified by the use of words such as will, expect, believe, anticipate, should or other similar phrases, are not guarantees of future performance. These statements are subject to numerous risks or uncertainties that could cause actual results to differ materially from our corporate working statements, and therefore, you should exercise caution in interpreting and relying on them. We refer you to the risk factors in our recent SEC filings, including our most recent Form 10-K as updated by our subsequent quarterly reports on Form 10-Q for more detailed discussion of the risks that could impact our future operating results and financial condition and other forward-looking statements. During today's call, we will discuss non-GAAP financial measures, which management uses and believes are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to our most directly comparable GAAP measure is available on our second-quarter 2019 earnings release. On the call today is Blake Sartini, the company's founder, chairman, president, and chief executive officer; and Charles Protell, the company's chief strategy officer and chief financial officer. Charles will start the call with a review of the quarterly results, while Blake will review recent strategic and operating initiatives, after which we'll open the call to questions. Thank you for your patience with that. And with that, it's now my pleasure to turn the call over to Charles Protell. Charles?

Thanks, Joe. Golden delivered its second straight quarter of record revenue and adjusted EBITDA as we generated growth in both our casino and distributed gaming operations. We also made further progress across several initiatives that we will discuss after reviewing the numbers. For the second quarter, net revenue grew 14.6% to $248.1 million and adjusted EBITDA rose 7.6% to $49.8 million, which includes a full quarter of operations from the two Laughlin properties acquired in January. For our Nevada casinos, second-quarter revenue was $140.3 million, up 24.2% from the prior year while adjusted EBITDA grew 16.7% to $42.6 million. Growth in the quarter for our Nevada casinos primarily reflects a full quarterly contribution from the Edgewater and Colorado Belle at Laughlin, partially offset by ongoing construction disruption at The Strat. For our two new Laughlin properties, we are on track to realize roughly half of our targeted $4 million cost synergies by year-end and we will capture the balance in the first half of 2020. We also completed the rollout of our new TrueRewards 1 card player loyalty program and related casino management system at all of our casino properties. We expect to see benefits from increased cross-play in targeted marketing toward the end of the year. At The Strat in the second quarter, we continued to see evidence of improved performance in areas we have renovated, such as our new taproom and lounge connected to our renovated sports book, as well as some upgrades we've completed to the SkyPod and several F&B outlets. In addition, we continue to see approximately $20 ADR premium over the standard room rate in our renovated rooms. At the end of May, we began renovations on the casino floor, which will continue throughout the balance of the year. With our push to complete the…

Thanks, Charles. I'd like to share with everyone my perspectives on the continued progress we are making across several key strategic growth and operating initiatives. Starting first with our ongoing renovations at The Strat. Despite the construction disruption, the feedback we receive from guests and team members has been extremely positive. Early results from our completed renovation projects continue to reinforce our expectations that the capital spend at The Strat will drive improved financial performance and meet our return expectation. Renovated rooms continue to generate a premium over standard room rate. The newly opened or refreshed food and beverage venues are producing more revenue and our sports book and View Lounge have become popular gathering spot for our guests. Our investment thesis remains simple. Approximately 2 million guests visit The Strat each year, obviously stay at the hotel or experience our restaurants and rides in the SkyPod. We want to give every one of these people a reason to stay in our property a little longer by offering experiences that give them a chance to spend a little more. A pull-through on just a small level of incremental spend will significantly improve The Strat's operating results. In the second half of the year, we will focus on updating the casino floor and the remodel of additional hotel rooms. We started the casino renovations at the end of May and are now working on the central part of the floor. This will be a bit more disruptive than other property construction, given the need to temporarily remove a number of table games through August, as we complete this section. That said, we have staged the casino remodel to complete no more than 20% of the casino floor at any one time, which should mitigate disruption. However, this extended the time needed…

Thank you. [Operator instructions] Our first question comes from Chad Beynon with Macquarie. You may proceed with your question.

Good afternoon. Thanks for taking my questions. Blake, Charles, regarding The Strat room renovations that you talked about for the back half of the year, will the design and product be similar to what you've already renovated? And should we expect a similar type of ADR lift on these rooms once they're fully open? And then secondly on that, will you able to do anything with the resort fees or there's something that you want to be a little bit more cautious on until you have more of the updated rooms?

To answer your first question, the short answer is, yes. The rooms will be consistent with the current product we're producing. We are going to initiate some suite product, obviously, which would be differentiated a bit from the design and FIT type of product. And yes, we anticipate to continue to receive the premium that we're currently receiving on the new room product. So I would say the answer is, yes, to that part of the question. As far as the resort fees, we've always said and I continue to be true to the fact that The Strat is a mid-market property that represents a solid value with a five-star experience is how we're approaching this property. We mean -- I think it's a pragmatic and disciplined spend of capital on a property that really has been touched significantly for 19, 20-ish years. And given this, the overall positioning of the property and our approach to the renovation, we're going to be cautious and stay the course at this point with our resort fees. We have free parking, which we will continue with as well. And I think that positioning of that property along with our renovations if our early results in the new revenue -- in the product is an indication are going to be very well-received.

And then on Illinois, I guess a two-parter. Firstly, we all saw the gaming build expansion, which makes the route operations in Illinois potentially more attractive. And then secondly, there was a large acquisition that what some of you had a pretty full multiple. Does this change your outlook on potentially acquiring someone in the route operations? Or does it just kind of justify the business that you've built over the years? Thanks.

Look, I think it's a little bit of both. I think this is probably a bit more the latter than the former in terms of justifying. We believe that that piece of our business is significantly undervalued. I say in terms of -- for us, we have an ability through our two business units, whether it's casinos or distributed, we're looking at what's the best place to deploy capital. So we can look at acquisitions in Illinois pretty full multiples or we can look at wholly owned casino assets right next to the assets that we operate where we have synergy opportunities at a better-blended multiple. And that was the decision that we made at that time. So we are watching and seeing what happens there and say that Illinois gaming expansion build is probably better for some than for others within that market. And so you have to really see how that plays out as more supply gets developed, who really uses more machines and if there's any potential for future tax increases in the future.

Thanks, Charles. Thanks for the results, guys.

Thanks, Chad.

Thank you. And our next question comes from David Katz with Jefferies. You may proceed with your question.

Are you there, David?

If your line is on mute, please unmute.

Maybe we'll circle back to Mr. Katz.

No problem. Our next question comes from John DeCree with Union Gaming. You may proceed with your question.

Just a question, I guess, on high-level on Las Vegas market, overall. It sounds like what we're hearing from some of the larger operators on the Strip that things are looking better in 3Q than maybe they did last time we were on the phone for these earnings calls and realizing you have some disruption at The Strat and don't have as much of a booking window, but wanted to get your thoughts on how Las Vegas looks for you or broadly speaking for the market in the back half of the year?

Yes. Sure, John. So from our perspective, as you know, The Strat's got limited visibility into forward bookings given its high reliance on RTA channel. So you're going to have -- for us, a significant amount of bookings coming within a 30-day window. That said, The Strat performs well when the rest of the Strip performs well. And so we've seen that from a room occupancy and room rate perspective within that property. That being said, that's offset with disruption that's going on with the renovation that we're making.

I think, generally speaking, John, to answer your question, in the short-term window, things feel pretty consistent. I mean, if you look at ADR and RevPAR on Strip in Q2, ADR up a little over 3%, RevPAR up almost 5%. The Strat was may have been pretty close or even little bit better in the second quarter in terms of the rooms. I think Las Vegas is feeling good. We've always said that. There are going to be some ups and downs, but as far as the booking window, I think Charles has addressed our limited visibility into that. But my general feeling and what I am hearing and talking to people around town is this kind of second-quarter consistency they feel like is continuing into the third quarter, and we're feeling it somewhat as well.

That's helpful. I appreciate the additional color. And to kind of stay on The Strat, I think, Blake, in some of your prepared remarks, you talked about the disruption at Stratosphere as you kind of move from table games around being pretty impactful through August. I'm wondering if you guys could give us a sense if back half more impacted than first half, but that split between 3Q and 4Q, will that disruption start to abate as we get into 4Q a little bit? Or pretty steady for the rest of the year?

So I think that there's -- I'd say this -- we'd mentioned we're still comfortable with consensus estimates for full-year EBITDA. We are starting on the renovations at casino floor. We're in the need of this. We're doing it in phases, so we'd expect that to be fairly linear in terms of the disruption over the balance of the year. To give a sense of context, if you look at first half of the year versus last-year first half, the disruption is about 5% to 6% of EBITDA for The Strat so far. So that's within the realm of our expectations, maybe even a little bit better. So we're doing a good job of managing that. And again, we expect to see that similar type of cadence through the back half of the year.

Got it. Really helpful. Thanks for the questions, guys.

Thank you. [Operator instructions] Our next question comes from David Katz with Jefferies. You may proceed with your question.

Hi. Good afternoon, gentlemen. Sorry, we're jumping around quite a bit this afternoon.

Okay.

What I wanted to try and get at is the degree to which you can affect some change or improvement or impact on the OTA levels within the property as the renovations are ongoing, right? Are there any sort of infrastructures or strategies that you have put in place or put in place now? And I guess the last part of my question is to the degree that you -- I hope you haven't addressed this already, but when we get to 2020, can you paint us a qualitative picture of what The Strat looks like then?

Yes. So David, on the OTA litigation, I guess, to your first question, while we're under construction. We have and are continuing to attack that part of our business and have begun through adding a more robust casino marketing program, adding some high-level casino team members and hosts. We have implemented the one-card program. I think we're signing up about 6,000 people a month now at The Strat for the one-card, for our casino card. So through that program and through more connectivity to our guests between the front desk and the SkyPod in terms of their information, we are initiating a beginning of that program. So that will only ramp up as our casino program gets close to being finished. At that point in time, with the larger new room inventory of 600 of our hotel rooms in our remodel and about 900 of the rooms that have been remodeled prior to our ownership, we anticipate a continued improvement in displacing OTAs with FIT and other more retail-oriented room customers. So that is ongoing and it's happening as we are under construction. As far as 2020, I think, that's a pivotal year for the Stratosphere. Our anticipation is our construction disruption and our remodel program on what is visible for the consumer from the time we enter the property pretty much through the entire first floor will be complete. New slot product, our one-card program, our casino marketing program, room remodels, as we mentioned, about 600 rooms. And in 2020, with a clean slate, I think, The Strat is going to look and feel a lot differently. And as a result, our expectations for that property, assuming the macro environment continues to be consistent, the property is going to -- I think, the 2020 is going to result in a change in look, change in feel and from my perspective, change of performance of the property.

Got it. Thank you very much.

Thank you.

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Mr. Sartini for any further remarks.

Thank you, operator, and thank you, everyone, for joining us today. We look forward to updating everyone when we report our 2019 third-quarter results.

Thank you, ladies and gentlemen. Thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.